According to the latest U.S. employment report, which was published today, October 5th by the Bureau of Labor Statistics the number of non-farm employees grew by 114,000. The main sectors that expanded during September were in health care and in transportation and warehousing. The rate of unemployment declined to 7.8%. Gold and Silver prices are falling along with other commodities rates.
The chart below shows the revised figures of the number of non-farm employees added to the labor market during recent years (up to September 2012). The change in non-farm payroll was revised up for July from +141k to +181k; For August it was revised from +96k to +142k. The revised up figures for July and August suggest the employment situation in the U.S has improved in recent months, so the situation might not be so dire as many stated in the past.
As I have calculated in the past, the number of non-farm payroll employment needed to be added to the U.S labor market on an average monthly scale to keep up with the growth of the U.S. civilian work force is at least 107k (see red line in the chart below). This means that the recent gain in employment in the past several months were higher than this number. Further, this also means that the number of jobs added in September just barley surpassed this figure.
The rate of U.S. unemployment declined in September to 7.8%. The rate of unemployment is at its lowest level in recent years. The current unemployment rate is 2 percent points lower than its rate in November 2010. This positive news for the decline in rate of unemployment was something that could help the President Obama in his future debates before the November elections.
Furthermore, the number of unemployed persons (12.1 million) declined by nearly 456,000 during September compared to the previous month.
Following this news currently, the Euro to US dollar exchange rate is slightly rising along with the GBP/USD; crude oil price is falling while the U.S stock market indexes are rising; gold price is falling.
Now let’s breakdown how this news might affect the direction of commodities prices, including the prices of gold and crude oil:
Gold Market
As I have already showed in the recent gold and silver prices monthly report, historically, as the non-farm payrolls expand by at least the population growth rate (roughly 107k), gold price tended to decline; this correlation was mostly due to the effect this news has had on the speculation of further stimulus by the Fed. On the other hand, the relation of the precious metals market with other markets including commodities and stocks may also play a role in this relation. I.e. as the prices of commodities (oil) and stocks rise, gold and silver also tend to increase. The rise in the Euro/USD is also contributing to the recovery of bullion rates.
The table below presents the correlation between the news of the U.S. non-farm payroll employment developments and the daily changes in gold and silver prices on the day of the U.S. labor report publication. The table shows the negative relation between the U.S employment and daily changes of precious metals.
Crude Oil Market
The recent rise in the non-farm employment is slightly lower than some had anticipated but is still above the 100k mark which is a positive sign for the recovery of the U.S. economy from the perspective of the U.S’s work force. These numbers might be a seasonal effect but if they will continue it could help with the recovery of the markets as it signals an expected rise in U.S. demand for crude oil, and consequently may continue to pressure up crude oil prices during today’s trading.
For further reading: